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Massey's latest Home Affordability Report out now

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Fuseworks Media
Fuseworks Media

Efforts to cool Auckland property market taking effect Lower interest rates and the Reserve Bank’s loan-to-value ratio restrictions are making Auckland houses more affordable, according to the latest Massey University Home Affordability Report.

Report author Dr Susan Flint-Hartle says the "modest" annual improvement in affordability of 3.1 per cent in the country’s largest city is "good news for policymakers intent on moderating the persistent inflation of Auckland house prices".

But she warns that this improvement, while welcome, offers limited respite for first homebuyers in Auckland.

"Despite the small improvements we’ve seen over the past few quarters, Auckland remains 59 per cent less affordable than the rest of New Zealand - and that is a record high. The only other region that is more unaffordable than the national average is Central Otago Lakes, at 48 per cent."

The report, which covers the period from December 2015 to February 2016, shows that many regions are fluctuating in their affodability from quarter to quarter.

"For example improvements over the last three quarters in Hawke’s Bay have been reversed by a 6.7 per cent deterioration in the most recent quarter," Dr Flint-Hartle says. "Similarly, the 10.5 per cent improvement in affordability for the Central Otago Lakes region in the September quarter has been almost completely negated by declines over the past six months."

Dr Flint-Hartle says recent movements in affordability have largely been driven by falling or rising house prices. Auckland’s median house price fell by $15,000 to $750,000 over the most recent quarter - but if you take a longer view, this figure still represents a $75,000 climb over the past 12 months.

Other regions - including Hawke’s Bay and Central Otago Lakes, where house prices have increased by 10.4 per cent and 15.4 per cent respectively over the last quarter - show corresponding decreases in affordability.

"It seems house prices in these regions are being driven by demand, created by a bouyant tourist market and a ripple effect as some Aucklanders vacate the city for a more relaxed lifestyle or to seek better investment returns," Dr Flint-Hartle says.

Lower interest rates have also contributed to the overall improvement in housing affordability, and should continue to do so in the immediate future.

"The Reserve Bank governor reduced the Official Cash Rate by 25 basis points to a new low of 2.25 per cent in March, which will flow through to consumers and be reflected in the data for the next quarter," Dr Flint-Hartle says. "He also signalled a possible further drop later this year due to flat inflation figures and a worsening international economic output.

"While that reduces borrowing costs for homebuyers, improving affordability in the short-term, it remains to be seen whether lower mortgage rates will also push up house prices in the longer-term."

Key findings:

- A 9.2% annual improvement in affordability across New Zealand continues the trend of the past three quarters.

- All regions with the exception of Central Otago Lakes show an improvement in the national affordability index since this time last year.

- Auckland sustained its improvement in affordability for the third consecutive quarter, but is still the most unaffordable region in New Zealand.

- Hawke’s Bay, Central Otago Lakes, Taranaki, ManawatÅ«/Whanganui and Southland all reported a deterioration in affordability for the first quarter of 2016.

Least affordable region: Auckland - 59% more unaffordable than the rest of the country.

Most affordable region: Manawatū/Whanganui - 57% more affordable than the rest of New Zealand.

The full Massey University Home Affordability Report, which contains regional breakdowns, can be downloaded down at: http://bit.ly/home-affordability-march2016

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